Buy CVS Health (CVS - Free Report) Stock After Optimistic Investor Day 2019?
CVS (CVS - Free Report) stock jumped over 2% upon opening Tuesday morning and ended the day at $54.62, a 2.3% gain on the day. CVS shares did open lower on Wednesday, but confidence in the company’s future growth grew when it made multiple announcements regarding future earnings and projects at its investor day 2019 event.
YTD, CVS is down 17% and has underperformed against the S&P 500, as have peers such as Walgreens Boots Alliance (WBA - Free Report) . Historically, these two companies’ stocks tend to move together and the retail-drug store market as a whole has been on a downtrend over the past couple of years.
CVS started its investor day by announcing that it would be opening up 1,500 HealthHUB stores by the end of 2021. These stores are essentially remodeled versions of current locations, but with a heavier emphasis on health services and products rather than its current model that’s nearing that of a convenience store.
CVS also reassured investors that its Aetna acquisition will be a beneficial one. The acquisition will not fully be integrated into CVS’s business until 2020 according to management, but CVS looks to capitalize on the acquisition as soon as possible. Synergies from the acquisition are expected to be between $300-$350 million this year and around $800 million next year.
CVS came across confident at investor day, promising double-digit growth by 2022. Clearly, company executives always try to put a positive spin on the future. So investing in CVS based solely on this promise may not be completely justified, but it’s a good sign that the company has big plans in terms of growth for the future. That being said, analysts are also optimistic about CVS’ earnings, with earnings estimates for fiscal year 2019 having 14 upward revisions compared to just 2 downward revisions over the past 60 days. Zacks Consensus Estimates for earnings growth are at -3% for fiscal year 2019, but then jump to 5.3% above that for fiscal year 2020.
CVS also holds a Zacks Style Score of "A" for Value. With a P/E of 7.81, which is below the industry average of 8.90. CVS is a stock that currently has a good value compared to its peers. Good value partnered with solid future earnings expectations, increased synergies from the Aetna acquisition, and an expansion of its HealthHUB stores make CVS a good possible addition to a portfolio.
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